a. Does either hospital have a dominant strategy (or any dominated strategy)? Assuming they determine their strategies independently of one another, what are the hospitals’ respective (Nash) equilibrium strategies? Explain briefly. b. Suppose instead that the hospitals merge and, therefore, coordinate their service decisions. Which actions should they take? Explain briefly. c. What general economic reasons might there be for a hospital merger to generate an increase in total profit? Would the hospitals’ customers be likely to benefit from the merger? Under what circumstances? Explain carefully
The following payoff table depicts service competition between two hospitals
in a southeastern city. (Each payoff represents profit in millions of dollars.)
Hospital B’s Service
Basic All-Purpose Speciality
Basic 5, 7 5, 4 12, 6
Hospital A’s All-Purpose 4, 5 8, 7 7, 4 Services
Speciality 6, 10 3, 12 3, 3
a. Does either hospital have a dominant strategy (or any dominated
strategy)? Assuming they determine their strategies independently of
one another, what are the hospitals’ respective (Nash) equilibrium
strategies? Explain briefly.
b. Suppose instead that the hospitals merge and, therefore, coordinate
their service decisions. Which actions should they take? Explain briefly.
c. What general economic reasons might there be for a hospital merger
to generate an increase in total profit? Would the hospitals’ customers
be likely to benefit from the merger? Under what circumstances?
Explain carefully
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